In case you missed it, iTunes 5 includes a VBR option for AAC encoding. To access it, open up the preferences window, go to advanced and select the importing tab. Once there, set the encoder to AAC, select custom for the bit rate and then enable to VBR checkbox.
I normally use 192 Kbps AAC VBR for all my encoding as it sounds better than mp3 especially for music with a high dynamic range.
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